The entire supply chain is under tremendous stress. China’s aggressive zero Covid policy to stop the spread of the virus often results in weeks long factory shutdowns and hampers shipping of manufactured goods through affected areas. One in five container ships is now stuck at ports worldwide, with 30% of the backlog coming from China.
In the 1990s, companies pursued outsourcing, offshoring, and lean manufacturing to cut costs, retain market position, or gain competitive advantage. China emerged as a major manufacturing hub to serve global markets. As cases continue to climb and lockdowns disruptions extend; damage to supply chain efficiency is already evident. Some shipping companies earlier this month noted a 30% drop.
Supply chain disruptions could delay smartphone, PC, and automotive releases later in the year, as well as shrink device output as supplies run out.
Even when the lockdown does lift and logistics come back online in full, supply chains face fresh headaches as they all vie for supplies at the same time. If strict lockdowns in China are lifted, U.S. ports may be slammed with a wave of pent-up cargo from newly reopened factories in China.